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Non-bank aims to fill void in low doc space

by Reporter12 minute read
 scrutiny of borrower income and expense information

A non-bank lender has reinforced its commitment to low doc lending amid withdrawals from the space by some traditional banks.

Against a backdrop of greater scrutiny of borrower income and expense information, Homeloans Limited has said that it would capitalise on the void left by banks, including the Commonwealth Bank of Australia (CBA) and Bank of Queensland (BOQ), that have withdrawn from the low doc, or alt doc, lending space.

“Homeloans is well positioned to take up the alt doc volume that is presently going to banks,” Homeloans’ general manager of third-party distribution, Daniel Carde, said.  

“We have been offering specialist alt doc solutions for many years and have a team of loan underwriters who are well versed in how to assess these types of applications.


“We have always been strong in the self-employed and small business owner sector — and that includes both alt doc and full doc solutions — and will continue to service this borrower type well into the future.”

Mr Carde highlighted the need to service self-employed customers through the issuance of low doc loans, particularly at this time of the year.

“With the end of the financial year having just passed, many self-employed borrowers will know their income position for FY18 but won’t be preparing or submitting their tax returns for some months,” Mr Carde added.

For this reason, the GM said that alt doc loans tend to be more front of mind at this time of year.

The non-bank lender announced earlier this week that it would be increasing rates on alt doc MoniPower products from Thursday (26 July).

In a statement to The Adviser, Homeloans said that this product, which is “typically used for borrowers seeking fixed rate construction loans, offset on fixed rates, bridging, or other out-of-the-box requirements”, will increase by 0.12 of a percentage point.

The statement added that the change in rates was “directly due to an increase in wholesale funding costs”.

Banks pulling out of low doc space

Following its announcement to abandon low doc lending earlier this month, CBA told brokers that it is “simplifying” its product suite to ensure that it is “providing a suitable range of products that align with [its] customers’ needs”.

As such, from Saturday, 29 September 2018, the big four bank will remove all low documentation features on new home loans and line of credit applications from both broker and proprietary channels. Should a customer wish to top up an existing home loan or line of credit with the low doc feature, they must provide full financials for all new applications.

BOQ also announced the removal of its low document loan policy requirement from its home loan policy, which removed the product from sale.

A spokesperson for the bank said: “Following a recent review of our products, BOQ has decided to no longer offer low doc loan products.”

Many banks have been pulling back from offering these types of loans in the past few years (NAB pulled out of this area in January 2014 while Westpac withdrew its low doc loans in July 2017), citing unpopularity with customers.

ANZ recently told The Adviser that it does still offer low doc loans, but that they are “only available to customers under a strict criteria and make up a very small percentage of [the bank’s] current applications.

“To be considered, self-employed customers need to provide a deposit of at least 40 per cent of the property’s value.

“They also need to have a registered ABN for at least 12 months and provide their most recent 12 month business activity statements, including acknowledgement of receipt from the Australian Taxation Office,” the spokesperson said.

The trend is also reflected in recent stats, which show that there has been an ongoing drop in the number and value of low doc loans approved by the banks.

According to APRA statistics, the value of low documentation loans held by authorised deposit-taking institutions (ADIs) with greater than $1 billion of term loans has been falling steadily since its peak at the end of the calendar year 2010.

In the quarter ended December 2010, $60.2 billion of total residential term loans to households were low doc (comprising 303,000 loans), while the most recent quarterly statistics show that $20 billion of loans (through 101,000 loans) were low doc (in the quarter ended March 2018).

Of new residential term loans, just $225 million of low doc residential term loans to households were approved, making up just 0.3 of a percentage point of overall lending.

 [Related: BOQ pulls out of low doc loans]

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